UK defence cuts hit BAE profits

Profits at global defence giant BAE Systems were down last year as the company behind the Clyde naval shipbuilding operation warned deficit cutting measures in the UK and US were hurting its outlook.

The defence systems manufacturer, which employs a 3,000 strong staff at its two Clydeside yards, expects the UK defence budgets to remain flat as it announced underlying earnings before interest, taxation and amortisation at £1.9 billion, as against £2.02 billion in 2011.

However, BAE Systems' shares surged 4 per cent to 345.9p. Pre-tax profits was down to £1.4 billion from £1.5 billion and sales declined byh 7 per cent to £17.8 billion from £19.2 billion in a year that saw BAE fail to close a merger deal with European defence firm and Airbus owner EADS.

This came after the two sides had engaged in extensive talks last year with key stakeholders including the UK, US and Saudi Arabian governments.

The company's Glasgow yards are currently in the process of building major blocks for two ships in the Queen Elizabeth Class Carrier programme, billed as the largest ships to be ever built in the UK.

The company's next major naval project, according to experts would likely be the Type 26 programme, a new class of destroyers to replace the Type 23 frigates.

BAE's proposals for the design, manufacture and cost of the 13-strong fleet are currently under the assessment of the MOD as part of a four-year procurement process.